Did you seriously raid your nest egg without carefully considering all the options?

You are given a one time, 10k excemption on the penalty if you are a first time homeowner.

You need to make the move on the payment within 120days however unless I am mistaken.

Another alternative is that many 401ks allow you to pull out a loan on yourself. Yes, you'll have mini payments, but you are paying the interest to yourself. So the main cost is that of opportunity of the growth that could have been.

I took a loan off my 401k to pay grad school debt. One if the best decisions I've made. The (much lower) Interest was paid back to me instead of the bank.

As someone said you can use it for a home down payment but set it up as a loan and not outright withdrawal. There is no explicit penalty on a loan. Just the cost of missed growth if the markets are doing well.

quote:I took a loan off my 401k to pay grad school debt. One if the best decisions I've made. The (much lower) Interest was paid back to me instead of the bank.

I'm debating this right now, my GradPlus loans are at 7.9% and I could take a loan from my 403B at about 4% interest and pay the money back to myself. My concern is whether or not its wise if the money could be generating a greater than 8% return in the 403B. I got a 19% return in 2012. I also need to consider the tax benefits of the student loan interest write-off but I understand if your Adjusted Gross Income is too high you are granted no deduction. Need to verify this with my tax guy.

quote: Does anyone know if the loan and payments show up on your credit report?

Yes, the 401K loan does appear on credit reports... [/quote]

Not with my 401k plan. They also wouldn't count it in my DTI if I were to use it as a down payment on a mortgage because the money in my 401k is collateral for the 401k loan and is impossible to default on.

Could be. I have a loan I took out to buy my wife's car and it doesn't show up. I just had my credit pulled last week for a mortgage and there is nothing about it on there. I asked the loan officer if that loan would affect my DTI and she said it wouldn't. My plan is different than one I had in the past in that the money for the loan isn't withdrawn from your account, it's only used as collateral. In my case, the losses or gains on my 401k are the same as they would be if I didn't have the loan.

I work for a huge company with great benefits. If I had to guess, I would say they pay the company who handles our 401k good money to do so. This is from my plan website:

When you borrow money from the Savings Plan, the assets in your Savings Plan Account serve as collateral for the loan. When you have an outstanding loan, withdrawals/distributions that will reduce the collateral value below the amount of your outstanding loan balance will be restricted.

ETA: The loan is paid back to myself and the interest I pay goes into the "common assets" portion of my 401k.